tv The Profit CNBC November 8, 2014 12:00am-1:01am EST
lemonis: tonight on "the profit," just 30 miles outside of new york city, i'm at a chain of hair salons that operate on long island. carolyn: unique salon & spa. lemonis: the owner, carolyn devito, was badly burned by her ex-partner... carolyn: you expected us to do the work in the salons for nothing! lemonis: ...and is now drowning in debt. carolyn: i juggle every day of my life. lemonis: her salons look tired, and her staff is feuding. susan: my job is to know that you're doing your job right. lacey: i am doing my job right. lemonis: without leadership... so, what do you do here? debbie: um... lemonis: ...some investment... carolyn: i haven't taken a paycheck in like six months. lemonis: ...unique salon & spa will likely go right down the drain. something's got to change, 'cause this model doesn't work. my name is marcus lemonis,
and i fix failing businesses. if you don't like money, don't follow my process. i make the tough decisions. we're closing the store. we're done. i'm not talking about it anymore. i back them up, spending my own money. it's not always pretty... man: perfect flavor. lemonis: ...but this is business. you got to trust the process. i do it to save jobs, and i do it to make money. thanks for your business. this is "the profit." ♪ like, like, like that, like that ♪ the unique salon & spa is a full-service salon with four locations across long island, new york. woman: hey, what are we doing today? lemonis: they do everything from massages to nails... woman #2: a manicure/pedicure? lemonis: ...but their primary focus is hair. woman: you look great. [ laughs ] lemonis: 16 years ago, carolyn devito... carolyn: how can i help you? lemonis: ...and her partner joe secreeti bought their first salon. and it expanded quickly, but there was trouble along the way,
and their partnership blew up. carolyn: i can't stand him. i hate him. lemonis: they landed in an ugly legal battle. carolyn negotiated to keep the chain of salons, but she walked away with a mountain of debt. carolyn: the first year of the company was really survival mode, because my partner left me in such a financial mess. lemonis: despite the fact that she pulls in over $4.2 million in annual revenue, carolyn still struggles to pay down her debt. as a single mother of three, she's under enormous pressure to get it right. carolyn: such a headache. lemonis: if i can find a way to get this fading business a fresh new look and attitude, then unique salon & spa will be a cut above the rest. when i pull up to unique, i can tell this is a great location. the area is packed with stores and shops.
how are you? i'm marcus. jennifer: i'm jennifer. nice to meet you. lemonis: nice to meet you. is carolyn around? jennifer: yeah, she is. let me get her for you. lemonis: okay, great. the front of the store's been taken over by i don't know what, a jewelry store, and it looks like a secondhand clothing store. it is unique. i'll give her that. but i'm not so sure it's a good thing. how are you doing? i'm marcus. carolyn: how are you? nice to meet you. lemonis: nice to meet you. you're carolyn? carolyn: i am carolyn. lemonis: i mean, i have to tell you, there is a lot going on in here. do you feel like you have to have all of this? carolyn: women love to come in and do one-stop shopping. so i have boutiques in my locations. i have jewelry concessions in the location. lemonis: this isn't the only salon that i've ever seen with retail products up front, but this is ridiculous. to use your prime real estate to sell something other than your own hair-care products? big mistake. what percentage of your total comes from selling products? carolyn: 5%. lemonis: and how are your margins? carolyn: buy it for $5, you sell it for $10. lemonis: not bad margins.
carolyn: that's why i started my own product line. i came up with my own name, my own brand. this is a normal to dry shampoo. lemonis: how do these margins compare to like -- carolyn: they're a much better margin than that. lemonis: okay. and so do you distribute this product anywhere outside of here? carolyn: no, not yet. lemonis: have you tried? carolyn: no, i haven't tried yet. lemonis: you just didn't have the time. carolyn: i didn't have the time. lemonis: anytime i make an investment, i'm looking for a way to enhance it. clearly, this product has great margins, but the fact that carolyn doesn't distribute it is a real lost opportunity. what inspired you to get into this business? carolyn: i grew up in the industry. i started this with a partner about 16 years ago. a gentleman by the name of joe called me and said, "i'd like to become partners." i met him, and i decided, okay, let's do it together. 15 years later, i went to an attorney. i... lemonis: carolyn's legal settlement with her ex-partner prevents her from discussing the details. but what i can tell you is it had a tremendous financial impact, not only the money that she owes, but the damage it did to her credit. how many total locations?
carolyn: four. i have four locations, all on long island -- one here, two centre island, and then south shore is my massapequa location. lemonis: which is the biggest one? carolyn: this is the largest of the four locations. lemonis: can i have a tour? carolyn: absolutely. lemonis: that'd be great. carolyn: this is the color area. we do a lot of color. we get keratin treatments back here. we have an exhaust system for that up here. lemonis: that's disgusting. carolyn: that was here. it used to be a restaurant. lemonis: at first glance, it's not the most inviting space. carolyn: yeah, i know. lemonis: is it easy to recruit new stylists here? carolyn: the problem is, hairdressers want to go to what's new and happening and exciting. and, you know, this location here, it's 16 years old. you know, it's falling apart. lemonis: when you go to a salon that looks run-down and dirty, how are you supposed to feel inspired? i don't want to go into a place that looks worse inside than it did outside. that's why it's empty. carolyn: this is the dispensary.
these are the colors we use. part of the challenge is to keep a lid on the amount of waste. lemonis: oh. how much money do you think is in this room right now? carolyn: [ sighs ] probably about $25,000 worth of color here. lemonis: and how much do you think leaks out a month? carolyn: i always think it's like a 10% waste. lemonis: a month? carolyn: a month. that's my guesstimate. lemonis: the color room has about $25,000 worth of inventory, but it loses or wastes about 10% of that a month -- $2,500. on an annual basis, that's $30,000. we got a problem. carolyn: we grew so large that we needed a g.m. who needs an office. and this is susan, the general manager. susan: nice to meet you. lemonis: i'm marcus. nice to meet you. you're the number-two person? susan: yes. lemonis: how many total employees report to you? susan: pretty much everybody -- 120. lemonis: what has having a general manager allowed you to do differently? carolyn: you know, there's a protocol to go to before they get to me,
and my phone would ring 500 times a day. the employees would report straight to me. susan: you know, little things like that -- ordering, with communicating. lemonis: ordering products? susan: ordering products. lemonis: just at this location? susan: no, at all locations. lemonis: it seems to me that in a business of this size, there really shouldn't be a need for a layer of a general manager. lemonis: i'm marcus. angela: angela. lemonis: as i walked around and talked to all the employees in the company, there was one thing that was clearly consistent -- everybody hated the look of this place. woman: it's just got to be... woman #2: sharper. woman: ...revamped. lemonis: what should the look be? woman: [ laughs ] not that! not to kill your ankles when you sit down, no. lemonis: and i also got a little more detail on carolyn's ex-business partner. when did you go into business with him? carolyn: 1998 i started with him. lemonis: how many salons does he have? carolyn: he has about 22 now. lemonis: really? carolyn: yeah. lemonis: and there was definitely confusion about roles and responsibilities. so, what do you do here? debbie: i'm actually the manager here, marcus. lemonis: you are? debbie: yes.
lemonis: how is that different from susan's job? debbie: um... um...uh... lacey: hi, guys. is susan here? i need to talk to her. debbie: you need susan? let me get her for you. lacey: okay. susan: hi. so you left your salon by yourself to come here to tell me that? lacey: definitely, 'cause i was trying to get ahold of you and i couldn't get ahold of you. susan: i have two phones. lacey: i know. and i e-mailed you. what happened on saturday when the a.c.s were broken down? susan: i had a guy that worked on them. lacey: no, you didn't. susan: and where were you? lacey: i was there. susan: exactly. and that's where you're supposed to be. that's your job. i'm here to help you manage, not manage your store, so don't start with me. lacey: the a.c.s not working in plainview, and she never took care of it. we're sweating our ass off. i got clients leaving the salon, staff upset.
lemonis: who's supposed to do that? lacey: susan. lemonis: then why isn't she doing it? carolyn: i'm not sure. i don't know. she should have took care of it. lemonis: want to go talk to her? carolyn: yes. lemonis: let's go. it's obvious to me that carolyn hasn't established a chain of command. you can see it. you can feel it. you can hear it. what is the issue right now? lacey: i called her in the morning and said it's not working. she says, "i'll get on it. i'll call a couple people." and i said, "okay, great." time goes on. it's dying in there. people are screaming and yelling at me, so i called susan again. i said, "did you find anybody? let me know." she was like, "well, we'll wait till tomorrow." you know, it's saturday, and we're busy. there's no excuse for it. susan: and you know what? you don't need to tell me what i need to do. lacey: you're supposed to be there to help out. susan: no, i'm not supposed to be there. lacey: you're not?! susan: you keep on mentioning my duties. your job is to manage your salon... lacey: i did. susan: and my job is to know that you're doing your job right. lacey: i am doing my job right. you're not doing your job right. susan: you have no clue how to manage your salon! lacey: no, actually, i learned. i study. susan: you don't study. lacey: yes, i do study! lemonis: if susan is the general manager and something at one of the salons isn't working,
she should probably be on-site, making sure it gets fixed. carolyn: i think you should have been there, period, saturday, to have had peace of mind the whole time. that's how i feel. lacey: you need someone to take care of this stuff, and i feel bad. you got a text message from a staff member that was clearly pissed off at me. i said, "i called susan." susan: and why is she pissed off at you? lacey: why do you think? we're sweating our ass off. lemonis: a lot of these small businesses get in trouble because they have too many layers of management, and it became more obvious to me when some of the stylists wanted to pull me aside. i feel like i'm about to get jumped in an alley or something. woman: [ laughs ] lemonis: so, what's going on? woman: we have an issue. lemonis: okay. woman: um...susan. we are kind of confused at what she does. lemonis: yeah. woman #2: have you figured it out? 'cause we don't know. woman: she's off saturday, sunday, and monday. woman #2: she should be here on saturday. our biggest day she's not even a part of. i just don't... lemonis: how does this affect you in doing your job? woman #2: mis-booked appointments, lack of assistance,
and just customer service and lack of product. woman #3: we have never seen her once come up anything about inventory, about putting things in the computer. lemonis: nobody in here has ever talked to carolyn? woman: i think she has some idea. woman #3: but she's the type of person that thinks with her heart. she never wants to, you know, hurt anyone. she wants to give someone the benefit of the doubt, you know? lemonis: communication doesn't exist here. it's like the inmates are running the asylum. i'm hoping that she has a better feel for her financials. i need to understand the revenue. what's the total revenue, and how does that break down per store? carolyn: annually? lemonis: yeah. carolyn: um...say us, it's probably $1.2 million, maybe up to $1.5 million now. plainview is probably $1.5 million. massapequa is about $700,000 or $800,000. lemonis: okay. carolyn: bellmore is probably around the same, $700,000 or $800,000. lemonis: and so that's $4.2 million? which ones are not making money? carolyn: i think syosset. lemonis: this one? carolyn: right now, yeah. lemonis: so this location. carolyn: that's correct.
lemonis: if you took a location like syosset, how does the revenue of $1.2 million break down? carolyn: 70% of it's color. lemonis: 70% of the $1.2 million's color? carolyn: color. lemonis: [ laughs ] carolyn: color's big money. lemonis: are there opportunities to grow that business? how do you grow that business, in your mind? carolyn: you can add to highlights. you can add toners and glazes and conditioning treatments and... lemonis: which is why the materials and the control of those materials and the waste can either make money or put somebody out of business. carolyn: correct. lemonis: that's good to know. this further proves the fact that that color room better be right. current debt on the business? carolyn: $170,000. lemonis: okay. total number of employees. carolyn: 120. lemonis: oh. and you look at payroll as a percentage of revenue in this business? carolyn: yes. lemonis: and so what is that number? carolyn: where i'd like to be, where i think would be fair, 50%. lemonis: is that actually what it is? carolyn: 62%. lemonis: well, that's a big difference. that's 12%. in order for you to take out 12%,
you're gonna have to take out more than $400,000 in labor. a lot of small businesses make a lot of mistakes when they start acting like a big business. and so all these basically broke even for the year. carolyn: for the last two years, yeah. i haven't taken a paycheck in like six months. lemonis: wow. so, basically you're struggling. carolyn: the economy went down. my partner ended up, you know, not paying his bills. and everything was behind the scenes. but, you know, there's a constant reminder in these places, because i'm still doing business as unique within the walls of the old company. lemonis: how do you move past it emotionally? carolyn: i juggle every day of my life. [ voice breaking ] sorry.
lemonis: no, it's okay. that was a tough time. carolyn: very. it still is. my kids were affected. now i'm behind on my mortgage, taxes and things like that. so, i put on a facade, and i put on a happy face every day, and wake up. as long as my feet hit the floor, i go out running. failure is not an option right now in my life. lemonis: it appears as though carolyn's looking for a hall pass for a business relationship gone bad two years ago, and i get it, but it's probably time for her to get over it and move on. why don't we just grab a seat? carolyn: okay. lemonis: i guess the question that i have for you is, why did you call me? how can i help you? carolyn: because my business makes money. i'd like it to make a lot more money. i need somebody to help me take it to another level. you know, i've never in my life ever thought that my ex-partner,
joe, would ever do what he did. so i have to open up to somebody and say, "hey, i need a little help here." lemonis: part of the reason that i'm here is because i think you have your act together. carolyn: i do have my act together. lemonis: in some ways. in other ways, it looks like in some cases the inmates are running the asylum next door. you inherited a store that is tired, and you did not have the money to fix it up. today, it's hard to get somebody to come into that salon. i wouldn't get my hair cut here today. i do not want to run a flea market where there's lots of different operators. those look like bad business decisions. i have no interest in being a big partner in a hair salon. carolyn: if i see a value, i think it will be big if i can get something going. lemonis: it's just not something that i can scale across the country in a way that i really want to.
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lemonis: i have no interest in being a big partner in a hair salon, but i buy off on your idea of having the products really be what could actually generate some real cash, but i don't like your packaging today at all. carolyn: okay. lemonis: i think it's terrible. so here's my offer. i'm willing to put up $200,000.
number one, i want to invest in redesigning and relaunching the product line. number two, i believe the place looks very tired. and i want to start with one location, and i want to get it really right. we want to have a beautiful experience, but it's effective and efficient, and it's a good return on our money. carolyn: correct. lemonis: and, number three, the business needs working capital. so i want to put the right amount of cushioning in the business that i believe has you not looking over your shoulder every morning. carolyn: right. lemonis: and so, for the $200,000, i would want to be 20% of the salons and 51% of the product company. in the short term, i'm 100% in charge of everything. carolyn: well, i was thinking... what i've built so far, based on the numbers that i'm doing, would be worth a little bit more than $200,000. lemonis: so do you need more working capital?
carolyn: i probably would like some sort of value for what i'm selling you or what you're, you know? lemonis: oh. so you want to be able to take some money off the table? carolyn: correct. lemonis: put some money in your own pocket. i like the fact that you had no problem pushing back with me. i'll go to $250,000. carolyn: [ sighs ] i want you as a partner, so, and i want to make a deal. i want nothing more than that. lemonis: so we'll do the $250,000. because you came back and you bumped me. carolyn: [ chuckles ] lemonis: this is by far the most expensive haircut... carolyn: ...you've ever had. lemonis: [ laughing ] ...i've ever gotten. carolyn: it will be the best haircut you've ever had. [ laughs ] lemonis: we have a deal? carolyn: we have a deal. lemonis: congratulations. carolyn: thank you. thank you. lemonis: so, here's the deal. earlier, carolyn and i made a deal for me to become a partner in not only this business,
but in her hair-care products, as well. so, here are the things that are gonna happen here. i'm putting up $250,000 to put some working capital in this business to renovate this entire facility to be the first renovation of all of them. debbie: yeah. lemonis: one of the benefits of designing a new space is your ability to add more chairs. with the new, updated design, we should be able to add eight new chairs and eight new stylists to go along with it. if each stylist can generate approximately $1,500 a week in sales, on an annual basis, those eight stylists would generate $576,000 in additional gross revenue. the styling of hair and hair color is our core focus. we need everything else that goes along with that. whether that's fixing the product or adding other products and services, we're gonna do that. so, a big chunk of the money we're gonna spend is to build a new color bar and really increase our distribution of the product. in order for this business to be successful i want to make sure that we have clarity in the end
on who's in charge of what. who's in charge of this location? raise your hand if you know who's in charge. see the problem? for the next period of time, there will be no question i'm 100% in charge. all right, we have a lot of work to do. all right, let's get to work. thanks, guys. woman: thank you. lemonis: hi. susan: hi. lemonis: how are you doing? susan: good. how are you? lemonis: you look like you're waiting to talk to me. susan: oh, no, no, no. i'm good. lemonis: how are you feeling right now? susan: i don't know. confused. lemonis: well, what are you confused about? 'cause i want to make sure that we have leave here unconfused. susan: i'm just trying to do my job. lemonis: i know. everybody's got to know what their job is. it's unclear what your job is. it's not clear to me. susan: um... ...from color to supplies to staples to anything. lemonis: so you're like the purchasing manager. susan: yeah. lemonis: and has there been an inventory issue in this location in the past? how bad? susan: well, we run out of supplies.
we shouldn't run out of supplies. so we couldn't do a client today. lemonis: but we ran out of supplies, but don't you control the inventory? susan: um... no, some products i do order. they give me an invoice. the managers check what they need, and then they place orders. i want to keep it in my records what each salon is ordering weekly so they're not overselling or i have more control of to see what's, you know, the numbers. lemonis: hmm. okay. i have to get my head around that. today, carolyn and i are heading to rejuvenol, the manufacturer and laboratory that makes her hair-care products. man: okay, so this is manufacturing. all computerized, state-of-the-art. lemonis: what's a typical bottle of shampoo cost to you? carolyn: $4.50. lemonis: yeah, and you're selling it for what? carolyn: $18, $17. man: and that's cheap. lemonis: 'cause, you know, the purpose of us coming here today
was to figure out how to take her line from good to great. so, can we see the packaging? man: yeah, sure. lemonis: oh, great. check this out. laser-printed on. man: we do it here. we silk-screen. everything is silk-screened. lemonis: very cool. hi, cindy. cindy: hey, how are you? lemonis: i'm marcus. how are you? i'm looking for new packaging. what are some options of things that i can look at? where are tubes? cindy: tubes -- this is a bronze tube. lemonis: see? something like this to me, you could take the exact same product. can you put it in something like this? i could get 25% more in price. man: we can double the price on the tubes, yeah. lemonis: the number-one thing in this business is quality, but a close second is appearance. i don't want a bottle of dog shampoo on my shelf anymore, and i'm confident that if it looks better, we'll sell more of it. currently, carolyn sells the bottle for $18.
i can go from $18 to $22 by doing nothing more than changing the packaging. carolyn today does $50,000 just in her own salons. i'm confident that we can get outside distribution and do a million dollars in the first year. and so i'd like to give you guys the direction to develop the line, but i am not looking for this anymore. thank you very much. i told you, win-win. man: it's gonna work. lemonis: thank you very much. lemonis: so, in order for that product to work, we really need to figure out distribution. once we develop unique's product line, we're gonna try to sell it to every salon in the local area. carolyn's ex-partner, joe, has about 20 salons. the question is, is carolyn ready and able to move forward? your ex-partner, joe -- do you think he runs a decent operation? carolyn: the man has been the bane of my existence for the last two years. there's a lot of hurt and pain involved, and i don't know why you're bringing him up,
so i wish you would get to the point. lemonis: i mean, he has 20 salons, and i want to utilize whatever resources he has for our benefit. this all comes back to business. you got to have your game plan, and it cannot be dictated or affected by anybody, because you start to make decisions that are based on emotion and not on dollars or logic. take your emotion out of it. be a smart businesswoman that i know you are. i'm requiring it. hey. so, i just wanted to see if we could print out all the inventory. i just wanted to spot-check it a little bit. this particular part of the business, the color room, is really aggravating. we're sometimes unable to even take a client because we don't have the right product. if color's 70% of their revenue, it should be 70% of their focus. someone needs to take charge. here's the issue that i have. carolyn: okay. lemonis: ultimately, susan's failure is really your fault.
carolyn: my fault. lemonis: because we're responsible to hire people and train them, put them in a position to succeed. now, she isn't qualified to be the manager. she's not qualified because she's not doing basic things like inventory. carolyn: okay. lemonis: what i want to have is somebody that understands the hair business, understands how to deal with your managers. if you know how to run the salon business as much as you say you do, then you should know, in a salon, you have to have inventory. you told me that 70% of your revenue came from color. you want to go back there? carolyn: i know how the dispensary is. we don't have an inventory system there. lemonis: well, why? carolyn: 'cause i can't afford an inventory system. lemonis: oh, bullcrap. i mean, the place looks like a disaster. carolyn: this is how all the dispensaries look. this is how we do our inventory system. we put the cans in here, and we reorder based on what comes out of that garbage pail. that's our inventory system. i'm telling you. i know. lemonis: that's the most ludicrous thing i ever heard.
carolyn: i couldn't figure out a process to do it. lemonis: well, that's your fault. do it. come up with a half-assed system on a chalkboard. carolyn: they do not inventory this stuff in the computer. lemonis: who's "they"? carolyn: the managers. lemonis: who's reordering? carolyn: the managers reorder from what these -- lemonis: susan told me she reordered. carolyn: no. the managers take the orders, and they give her the numbers after they get them. lemonis: what is 7g? carolyn: these are the popular colors -- the g.n. -- lemonis: the popular ones are the ones we don't have? carolyn: we don't put 6, 7, 8 on the shelf because then they disappear. lemonis: they disappear because nobody's counting them. i'm tired of carolyn acting like the victim. i didn't invest in this company for the owner not to take control of their business. you don't know what you have in here, do you? carolyn: no, i have no idea. lemonis: that is the single biggest reason that your general manager should be fired. we're wasting $40,000 on susan. she's not doing inventory. the managers don't respect her. so what's the point? you're gonna have to defend yourself, because the nice marcus is still inside somewhere. right now i'm pissed. carolyn: but i haven't had control over this.
it's been a constant struggle. lemonis: but i don't want a damsel in distress. when people are sitting around, we're burning money. when products are disappearing, we're burning money. this is about being a leader. i'm sorry to put the pressure on you, but that's life. carolyn: okay. lemonis: something's got to change, 'cause this model doesn't work. it's totally broken -- totally broken.
big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern.
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lemonis: there seems to be a root of a problem here that really is -- i don't know that everybody knows what their job is. carolyn: i don't think so either. lemonis: well, that's your fault. carolyn: it is my fault. but you know what? susan: i was hired to help carolyn out and take the load off of her, since day one. lemonis: you're not executing the role of a general manager. your general manager would be at every store all the time, would understand the numbers, would know the reservation systems, would be doing training. and while you are a general manager in title, the girls that manage the locations don't know who their leader is. who is their leader? carolyn: me.
lemonis: well, what do i need her for? carolyn: inventory systems -- lemonis: all the things that aren't happening! and so who's supposed to do them? do you do inventory management? susan: we do not do that in any of the salons. lemonis: yeah. that's obvious. give me something else that you do do. susan: um...hire. lemonis: what's the most important thing about hiring? susan: um...interviewing them? lemonis: i just don't see the role. should an organization that has four salons and managers in each location have a person between the owner and them? that's my biggest question. and it's not about you, susan. it's -- should that role actually exist? and i'm struggling with it. something's got to change, 'cause this model doesn't work. it's totally broken -- totally broken. sal, i'm marcus. sal: hello, marcus. pleased to meet you. lemonis: we're gonna meet at belvedere, a manufacturer and designer
of state-of-the-art salon equipment. sal: this is equipment from germany. lemonis: given that the look of the salon is beaten-down and uninviting, i'm gonna totally renovate this place and take the look up about five notches. i want to make this place elegant and inviting. what happens here? sal: that is the color bar. you're applying color here and here. a big chunk of the money we're gonna spend is to build a new color bar right in the middle of the salon. i want the customers to see their color being made and be part of the process. carolyn, lay down. carolyn: [ laughing ] i don't trust this guy! there's no water coming out. lemonis: no, there's no water. and i've decided to take a little detour. i'm meeting carolyn's ex-partner, joe. joe: marcus? joe secreeti. pleasure to meet you. lemonis: really pretty place. joe: thank you so much. i said i'm going to brand myself to be different than everyone else. lemonis: i'd like to try to broker a truce between them and maybe do a little business. joe: if you're saying to me, would i possibly be open to doing something with carolyn,
the answer is yes, as long as she would be open to it. lemonis: it was great meeting you. joe: it's my pleasure. lemonis: thanks, guys. i appreciate it. bye-bye. where's susan at? she texted me, "you don't need me anymore." lemonis: so, do you have her number? carolyn: mm-hmm. [ ringing ] susan: hello? lemonis: susan, this is marcus and carolyn. you know, i just don't understand why you just leave in the middle of the day. carolyn: should have waited till the end of the day and we could have spoke. susan: i've never showed you any disrespect ever. lemonis: well, i'm sorry, but -- susan: i've never given you trouble. i've never given you drama. lemonis: i think walking out's pretty disrespectful. carolyn: well, you shouldn't have walked out, susan. i would have talked to you one-on-one. you shouldn't have walked out, so... susan: i think i deserve that respect now. lemonis: well, you sent a text saying that you don't work here anymore, so which one is it? [ line clicks ]
oh. she hung up. there is no place for her here, in my mind. what's wrong? carolyn: [ voice breaking ] it's overwhelming sometimes. lemonis: i know. carolyn: and altogether, it's overwhelming, you know? i lead by example on everything in my life. i do. and even the managers, like you expect them to get it, get it. and then living in fear of, you know, getting rid of somebody because they're gonna take your staff or -- you know, it's like, it's a lot. it's overwhelming. lemonis: yeah. susan: so i have not been able to make decisions based on what's right or wrong, you know? it's all been based on fear for 2 1/2 years. lemonis: i think you're letting your heart get in the way of making good business decisions. and so part of my reason for being here is not only to be your partner, but to push you. carolyn: i get it. i totally get it.
lemonis: these are things that you needed to do regardless. carolyn: all of it's my fault. lemonis: well, let's not get dramatic. don't be dramatic. losing susan is one of the key ingredients to getting this business to profitability. we already know they have too much in labor costs, so this is one step in the right direction. carolyn: the question is, if somebody's trustworthy and loyal -- lemonis: she's not loyal. what makes her loyal? it was the first time you've confronted her. she didn't like what she heard, and what did she do? she bailed. where is the loyalty in that? carolyn: i guess you're right. lemonis: if your business is in trouble and you need my help, log on to theprofitcasting.com. [ male announcer ] how did edward jones become one of the biggest financial services companies in the country? hey. yours? not anymore. come on in. [ male announcer ] by meeting you more than halfway.
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deie: let's do it! thanks for meeting so early. come on in. [ excited chatter ] carolyn: all right, listen. the past is the past, and on to bigger, better, and more powerful things. lemonis: today we start the renovation, which is symbolic for a lot of reasons. [ all cheering ] i could imagine that it's pretty cathartic for carolyn to take a sledgehammer to her old, tired salon that's filled with a lot of baggage. [ all cheering ] out with the old and in with the new. this renovation isn't just about looking good.
it's about making more money, as well. i want to add at least eight more chairs. more chairs, more color. more color, more revenue. everybody's happy. it will also give us a special area to merchandise our new retail products. [ all cheering ] [ applause ] feel good? this is awesome. carolyn: feels really good. lemonis: hey, guys. welcome to our studio. carolyn: [ laughs ] man: good to see you again. carolyn: this is the new unique. man: mwah! lemonis: good to see you. okay. so the team from rejuvenol is here to show us the new packaging for our products. woman: i just want to show you one of the designs that i've come up with. lemonis: i don't like it. by the way, i think you did a great job with picking the color of the package. the layout's fantastic. this is beautiful. but i'm seeing "i am unique," which is great.
yeah, you are unique. but there's a million other uniques out there in the hair-care line, and so how do we stand out? carolyn: we have to come up with, you know, another name that is very...catchy. lemonis: how about your daughters' names? carolyn: my daughter's names, erika with a "k," raquelle, and cole is my son. lemonis: erika cole. carolyn: erika cole. can we get raquelle some in there? man: erika cole by raquelle. lemonis: that's it. carolyn: erika cole by raquelle? that's great. lemonis: i feel good about that. you feel good about it? carolyn: yes! see? lemonis: i want to see what that looks like mocked up. "erika cole by raquelle." carolyn: i like that. lemonis: do you? carolyn: that's cool. lemonis: good morning. carolyn: good morning. your bright and early, chipper, and a smile on your face. lemonis: so, i was actually thinking all night about rejuvenol and all the things that we can do. i'm not a fan of launching a private-labeled product and putting all that money into it and going through all that for four locations.
i want to figure out how to make money. carolyn: okay. lemonis: and so it's important to me for you to have closure on the issue with joe. just the way you close up and your facial reaction when i mention his name shows me that he's baggage. and i have to tell you, it's not good. carolyn needs to shake the past. when people fall down, they need to get up, dust off, and move on. i think if she can do that, she'll not only move forward professionally, but personally, as well. carolyn: i don't understand what you're really trying to do. lemonis: make money. for business advice and extra scenes from the show, go on to cnbc.com/the-profit.
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remember, carolyn, whatever you have to say, whatever it is, be yourself. carolyn: okay. lemonis: i've asked carolyn to meet with joe to say her piece. if she can get over things, we can potentially distribute our product through his salons. you know, i feel like, together, we could do something really good. but obviously, you know, there's a lot. so, you guys are both looking to me. [ both laugh ] and, quite frankly, i'd like you guys to talk to each other before i talk. joe: well, i'll just say that carolyn and i were partners for many, many years. and, so, we got along relatively good, and then it turned bad and ugly,
and i'll take some of the responsibility for that. two years later, i'm emotionally over it, and i'm moving on. carolyn: when did that happen? yesterday? the day before? you almost put my family out of a house, my kids on the street! you did. not me. you did. joe: okay, you blame that all on me. carolyn: that's right. you took money from everybody! joe: i did not do that. carolyn: you didn't have a franchise. joe: but we were paying for mark-- carolyn: you expected us to do the work in the salons for nothing! lemonis: it's clear to me that we won't be doing any business with joe, and obviously carolyn had a lot to get off her chest. carolyn: the company paid you $10,000 a month until you put us out of business. joe: well, that's incorrect again. i'm done. i'm over it. it's over. i don't care. carolyn: okay. then i don't care. you almost put me and my kids on the street, and for that i don't know how you stick your head on the pillow. and i don't need you or your cactus or your marketing money.
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carolyn: i grew nassau county, not you. lemonis: that meeting with joe and carolyn did not go at all how i thought it would. how did that feel? carolyn: ...awesome. lemonis: [ laughs ] the good news is, is that i feel like carolyn made peace and she got over what she needed to get over. so if there's a golden nugget to take away from that very crazy meeting, it's that i feel like she can move forward now. what do you say we get back to work? carolyn: okay. lemonis: we're gonna make a lot of money.
this is one of the biggest and most rewarding transformations that i've ever done. when i got here, the lighting was horrible. i replaced the old, dirty skylights with double-paned glass that really lets the light through. i added a new lighting system, and i also added chandeliers. i replaced the old ripped and broken chairs with brand-new seating for both comfort and style, and the old product display was disorganized and cluttered, so i added new backlit displays so our new product really stands out. carolyn: hey, doesn't this look amazing? amazing! woman: if you're happy, we'll all be happy. lemonis: the new salon has just opened, and the entire mood is completely different. woman: this is where we belong, i think. lemonis: with over $300,000 in total renovations, i can see it's already starting to pay off. carolyn: oh, my god. lemonis: oh, my god. carolyn: unbelievable. lemonis: it looks unbelievable.
you know what i like more than anything? the fact that the chairs are full. how many new chairs do you have? carolyn: 31. lemonis: so eight more chairs. and look at it. they're all full. and each one of those chairs is generating an additional $6,000 per month in revenue. how do you like how the color bar came out? carolyn: oh, my god. it came out awesome. lemonis: 70% of our revenue is done right here, and this is how we pay our bills. carolyn: now as they use it, they're writing it down. the person that's in charge back there will also scan it so it goes right into the system so our reordering process will be based on whatever girls need. lemonis: so there's an inventory system in place. i'm gonna be sending in secret shopppers just to be sure that it's right. carolyn: good. i hope so. lemonis: with the new color bar, we've also eliminated the 10% waste they were experiencing, and that's added an extra $30,000 a year. so, one of the things i did is i had at&t come in and put in a fully integrated system. there's now wi-fi here. and the thing that i'm most excited about
is this new mobile-forms concept. let me show you how this form works. i have a closing checklist and then an opening checklist. it literally walks them through all the things that they have to do. as an example, "balance out the cash drawer, "set aside cash for the next day, turn off the heat or the air-conditioning." and they can't close until everything's checked. carolyn: that's great. lemonis: and i also wanted to get feedback from people. if people fill out this survey, it gets e-mailed to you and i on a daily basis so we know. they get a gift certificate for our products. carolyn: perfect. lemonis: our brand is now erika cole by raquelle. these products we think are all gonna be in ulta in a couple thousand stores across the country. i can't believe how good this packaging looks. carolyn: came out amazing. lemonis: i mean, look at this. i mean, honestly, where is the old one at? i just want to see the difference. this is retailing for how much? carolyn: $18. lemonis: and how much was this one? carolyn: $22. lemonis: and what is the difference in cost? carolyn: there is none. it's the same item. lemonis: so look at what a difference packaging makes.
and once we distribute this product, it's gonna be amazing. fantastic. i feel like we entirely changed the process. we've launched a new product. i feel like we're closer to the business today, and i think we've got over a big fear. carolyn: yeah. i feel like the weight is off. i have a purpose -- a new purpose without all of that baggage weighing me down. and i thank you. lemonis: carolyn seems honestly like a new person. she's moved forward, and you can tell this is a new day for her. but, most importantly, i left this place in way better shape than when i found it. i can see that it's doing business, and i'm very pleased. i want to thank you for everything. carolyn: no. are you kidding? i thank you. are you kidding? lemonis: i'll be checking in. carolyn: and i want you to. lemonis: see you soon. carolyn: okay. lemonis: bye, ladies. woman: bye!
>> tonight on the profit... i'm going inside la dogworks, and upscale dog boarding facility that is on the brink of going out of business. >> take a guess on how much you made. >> i have no idea. >> $78. [woof woof] while i like the product and i like the process, the biggest problem here is how its abusive owner andrew rosenthal handles his employees. >> email me the [bleep] schedule! just do it! >> i'm gonna try to improve the owner and employee relationship before it's too late. >> i don't have to ask him time and time and time and time again! he doesn't care! >> my name is marcus lemonis, and i fix failing businesses. i make tough decisions... i will not do it if you're